Providence was on track for its first positive operating year since the pandemic through the first six months of 2024, but a $208 million operating loss in the third quarter dragged down its performance.
The Renton, Washington-based nonprofit health system posted a $155 million operating loss (-0.7% operating margin) for the nine months ending Sept. 30. But that's an improvement from an operating loss of $857 million (-4.0% operating margin) over the same period a year ago.
The health system reported back in June a six-month operating income of $53 million (0.3% operating margin). It reported a strong $176 million operating gain (2.3% operating margin) in the first quarter to kick off 2024.
Operating EBIDA in the third quarter was $165 million, and operating loss was $208 million (-2.7% operating margin), representing an improvement of $61 million and $102 million, respectively, the health system reported. During the third quarter of 2023, the health system reported a $310 million operating loss (-4.3% operating margin).
Providence reported operating revenues $7.6 billion in the third quarter, up 5.7% from $7.2 billion during the same period a year ago. The revenue increase was driven by higher patient volumes and improving rates.
Providence's higher patient volumes drove a corresponding increase in operating expenses of 4% to reach $7.8 billion, primarily in higher labor and supply costs, according to Providence's third-quarter financial report.
Salaries and benefits increased 4%, while Providence experienced an overall increase in labor productivity due to continued focus on staffing challenges. Supplies expense increased by 8% compared to the prior year, driven by a 12% increase in pharmaceutical expense, the health system reported.
Providence leadership said the health system's third-quarter performance showed improved operating results driven by higher patient volumes, increased reimbursement, lower lengths of stay and reduced use of agency contract labor.
“While macroeconomic pressures persist, including the national shortage of health care personnel and the rising cost of drugs and supplies, Providence has stayed the course on our renew and recover strategies, and as a result, our operating performance continues to improve in many of our local markets. We are grateful to everyone at Providence for their steadfast commitment to compassionate, high-quality care,” said Providence Chief Financial Officer Greg Hoffman in a statement.
In the third quarter, Providence experienced higher volumes compared to the prior year, with inpatient admissions and case mix adjusted admissions both up 4%. Acute adjusted admissions increased 5%, physician visits increased 4% and home health visits increased 2% in the third quarter compared to the prior year.
For the nine-month period ending Sept. 30, Providence reported operating EBIDA of $973 million and an operating loss of $155 million, representing $635 million and $702 million improvements compared with the prior year, management said. These results include one-time net gains of $371 million from Tegria’s divested subsidiaries and $55 million from the sale of laboratory services recognized in the first quarter of 2024.
The health system pulled in $23 billion in operating revenue for the nine-month period in 2024 so far, up 9% compared to $21.2 billion a year ago.
Management said operating results improved through the nine months of 2024 due to revenue growth driven by higher patient volumes, lower length of stay and increased rates, which resulted in an 8% increase in net patient service revenues.
For the nine months ending Sept. 30, inpatient admissions were up 4%, acute adjusted admissions grew 5% and case mix adjusted admissions increased 4%. Length of stay dropped 3% due to improved access to post-acute care.
In the non-acute setting, both home health visits and physician visits grew 3% in the nine-month period.
Financial market results drove investment gains of $248 million in the third quarter, leading to a positive net income of $20 million, bringing Providence’s total unrestricted cash and investments to $7.8 billion for the nine months of 2024 so far.
Since year-end 2023, accounts receivable (A/R) has risen by $515 million or 7.4 net A/R days due to an increase in denials, underpayments and requests for information from payers. Providence is pursuing multiple technology, operational and legal tactics to lower A/R days with its payers, management said.
The health system invested $1.3 billion in community benefit throughout the nine months of 2024.
“Just as we have for more than 165 years, our commitment to serving those who are most vulnerable has not wavered. The Mission of Providence is well positioned to endure and thrive for generations to come, and we continue to make important strides in advancing the healing ministry throughout our communities,” said Providence President and CEO Rod Hochman, M.D., in a statement.
Providence is comprised of 51 hospitals and more than 1,000 clinics across a seven-state footprint. The system employs over 124,000 people serving communities across Alaska, California, Montana, New Mexico, Oregon, Texas, and Washington, with system offices in Renton, Washington, and Irvine, California.